There are a few ways investing in vacant properties is a little different than investing in abandoned properties. Both can be valuable investments as long as you remember what your goals are.
Abandoned properties come with stories. Sometimes they’re also vacant and other times they’re fully furnished. Whether the furnishings offer added value or removal is an added burden is yours to determine.
The owners of abandoned properties might just have walked away. They may no longer own the home. It might belong to the bank. The property could be condemned, damaged or under a lot of debt. Determine the cost of restoration, fees and bringing it up to code.
This could be no joke. Depending on how long the property has been abandoned, it could be in really bad shape. That doesn’t mean there isn’t a potential investment under all that baggage—it’s just different than that of a vacant property in decent shape.
A vacant property might have an owner or owners even though no one lives in the property at the time it shows up on your radar. There are various reasons for this. One might be inheritance. It can be a good thing and it can also create a confusing encumbrance for some heirs.
When someone dies, a number of things might be true. Here are a few common scenarios:
1) The property owner may have planned for the estate upon his/her demise with a will or trust
2) there was joint tenancy
3) the now-deceased property owner made no plans and the property is in limbo and
4) here’s the big one:
The property is in probate.
Be willing to roll up your sleeves and dive in. In most cases these can be very good investments if you’re ready to do the work.
In the best case scenario, when the owner prepares a living trust or will—even when assets are minimal—planning ahead saves heirs the stress of dealing with probate. The new owner(s) may not want to keep the property and may be interested in selling.
If there is joint tenancy and the surviving tenant dies, issues can arise; especially if they aren’t technically heirs to the estate. No will or trust? Welcome to probate.
Sometimes legal heirs live a distance from the property or out of state. In this case, they may not know what to do with the inherited property and so it sits either with contents or empty. Some heirs continue to care for the property and pay taxes, others do not.
Chances are if no one plans to live in the now-vacant home, you will be face-to-face with a motivated seller. Well, sort of. You still have to locate them.
Cross your fingers that the property isn’t in probate. This can be a long, drawn out process. It’s difficult but not entirely impossible.
In the case of a trust or will, if an executor wants to sell real estate, they may need to get court permission. However, a law called the Independent Administration of Estates Act gives executors freedom to pay creditors’ claims and sell estate property without prior court approval.
When there is a trust, the trustee, can sell the property without court approval, provided the decedent’s wishes don’t disallow it. So there’s a little homework ahead, but if the trustee is a motivated seller, you should get a price that makes the effort you expend worthwhile.
As you can see there are a number of stories behind the door of the vacant or abandoned property you happen upon. Be willing to roll up your sleeves and dive in. In most cases these can be very good investments if you’re ready to do the work.